Welcome to the new Becker-Posner Blog, maintained by the University of Chicago Law School.

September 2007

09/23/2007

There are perennial calls for drafting all 18 year olds to serve in either the military or some civilian alternative. Congressman Charles Rangel has repeatedly introduced bills in Congress (the "Universal National Service Act") that would do this. The bills have never come close to passage, and are unlikely to in the future even with Democratic control of both houses of Congress. But universal national service is one of those seductive ideas that refuse to die completely, and perhaps therefore it deserves a serious analysis. It is analytically interesting and can serve as an example of the utility of a cost-benefit approach to public programs.
Roughly 4 million Americans reach the age of 18 every year. There are only 1.4 million active-duty military personnel, so only a small fraction of each vintage of 18 year olds could be assigned to the military. At their present size, our active-duty armed forces require only about 150,000 new recruits each year. So any universal national service obligation would have to be primarily an obligation to do civilian work.
Civilian national service (in the United States--thus excluding the Peace Corps, and the missionary work that young Mormon men are required to perform for two years without compensation) funded by the federal government exists already. The "AmeriCorps" program provides federal grants to a large number of service organizations, both public and private. Although these organizations pay only the living expenses of their volunteers plus a modest education grant, the federal contribution amounts to some $27,000 per volunteer.
The number of volunteers supported by AmeriCorps grants is small--well under 100,000. But of course total volunteer activity is much greater than that, and by no means limited to young persons--an affiliate of AmeriCorps is the "Senior Corps." A survey by the U.S. Department of Labor found that there were some 60 million American engaged in volunteer activities in 2006 and that the median number of hours that the volunteers devoted to such activities was about 50 hours a year. Thus, assuming that the average is not much different from the median and that a full-time job is 2000 hours a year, there were the equivalent of 1.5 million full-time volunteers (50/2000 x 60 million). That number is important because a universal national service obligation would have a substitution effect: someone required by law to provide a year of national service would be likely to reduce the amount of volunteer service that he would provide in the future. If, for example, there were a two-thirds reduction in volunteering, from 1.5 million full-tine equivalents to 500,000, and thus a loss of 1 million full-time-equivalent volunteers, universal national service would augment volunteer activities by only 3 million full-time equivalents a year (4 million - 3 million). Granted, this number would rise if universal national service had a complementary effect on volunteer service rather than or, more plausibly, as well as a substitution effect--if, that is, the year of obligatory service created a taste for such service. I find this implausible.
If 4 million persons were conscripted for one year's national service, at an annual expense of $27,000 per person, the program would cost more than $100 billion a year--probably much more, because the $27,000 figure excludes the overhead expenses of the service organizations that receive the per capita grants. The $100 billion (or whatever the correct figure is) would be a transfer payment, but it would generate costs of two types. The first would be the deadweight costs that the taxes required to fund the payment would impose. The second and doubtless greater cost would be the difference between the value of the conscripts' national service work and the value of their output in whatever jobs they would have had were it not for their national service obligations. About half the 18 year olds would (but for their national service obligation) be in college rather than working, and so the effect of universal national service on them would be to postpone their entry into the job market by a year. Their lost wages in their first job would be a rough estimate of the value of their work in that job. The starting salary for college graduates is more than $40,000, other than for liberal-arts majors, and this is about twice the starting salary for high school graduates. That is some evidence that a universal national service program would be inefficient: it would in effect reallocate a year of a college graduate's working life from after college to before college, when he would be less productive.
Against this it could be argued that the national service work that the 18 year olds would perform would have a social value in excess of its private value. But this seems unlikely for most jobs that these teenagers would perform, such as helping out in hospitals and nursing homes and picking up litter on roadsides and in parks. A possible exception is tutoring children, since education produces significant social benefits. But only a small fraction of the 4 million national service conscripts could usefully be employed in that activity.
Universal national service would also have peculiar effects on the distribution of income. The unpaid national service workers would replace low-paid service workers, pushing many of them into poverty.
Proponents argue that, all narrowly "economic" issues to one side, universal national service would confer intangible social benefits in the form of increased solidarity, as all Americans would share in the experience of working for the overall social good without compensation beyond modest living expenses. But given the heterogeneity of the jobs that the national service workers would be performing, the solidarity-enhancing effect would surely be quite limited. It would be different if the 4 million were all drafted into the armed forces for a year, but that is infeasible.
In a candid moment proponents of universal national service might respond that its real purpose is to take rich kids down a peg by forcing them to work for a year with minimal compensation. The hope would be that the experience would make the rich empathize more with the poor and therefore treat them more generously. This seems unlikely, though the issue is worth studying. A person's attitude toward issues of distributive justice is shaped by a variety of factors, including temperament, parental values--and personal experiences not limited to a year's working without pay.

Universal service usually means that young persons, say 18 year olds, can either be drafted into military service for a specified period, say a year or two, or instead they can work for a similar period in one among a number of qualifying occupations. In Germany qualifying occupations include menial jobs in hospitals or nursing homes, while France has qualified working overseas in a French company. This approach to service has been advocated mainly by persons who would like all young persons to serve in the military, but reluctantly recognize that this is impracticable because of the small size of the peacetime armed forces compared to the much larger number of young persons available.
In effect, such compulsory service is a tax on those serving that has many of the characteristics of a very bad tax. It is a tax in kind, on the time of young persons, rather than a tax on income, wealth, or spending. A tax in kind limits the ability of those taxed to respond by substituting toward a more efficient allocation of their resources. In-kind taxes also limit how governments can spend their tax receipts since these tax receipts are not general purchasing power. Universal service is also a narrow-based rather than a broad-based tax. Broad based taxes, such as a general value added tax on all transactions, are better because marginal tax rates, and hence the inefficiency caused by the tax, can be lower for a given level of receipts since the base being taxed is more extensive. By contrast, narrow taxes have high marginal rates for any given revenue, and hence generally distort behavior much more. In the case of service, young individuals who have much better opportunities in school or at jobs that do not qualify will be taxed heavily, as would young persons who greatly dislike spending all their time either in military service or at one of the recognized alternatives.
Narrow-based taxes often are enacted because of the weak political power of those being taxed compared to groups who benefit either directly or indirectly from such taxes. For there is no argument based on efficiency why young persons should be the primary suppliers of the resources needed to fund peacetime armed forces. The effects on efficiency would be better during a major war since then the social cost of the taxes needed to get enough young volunteers for the armed forces may exceed the social cost of a draft.
The logic of combining a military draft for young persons with an alternative of compulsory service at other occupations is questionable also on grounds other than being a bad tax. If greater employment at hospitals or other tasks has social value beyond the private value to those working there, it would be better to subsidize anyone who works at these tasks than to require young persons to work there. With subsidies, the general taxpayer would finance any desired greater output in these sectors rather than young persons doing their compulsory service. Furthermore, a subsidy would attract workers of all ages, and so would be much less socially costly than compulsory service applied only to a single age group.
As Posner indicates, one possible justification for compulsory universal service is the belief that it is good for young men (and women as well?) to serve with low pay in the military or other specified occupations. The argument might be that such service makes them better citizens, perhaps because they would then appreciate the hardships of the poor. (Does that mean that the poor should be exempt from this service?) Even accepting this argument, which I do not, compulsory service is a bad policy. A better way to achieve service with low pay would be to combine a ceiling on the earnings of young persons- the opposite of a minimum wage- with a subsidy to employers if they hired these persons at the desired occupations. This approach would have the advantage over compulsory service of allowing young men (and women) to avoid the military and other specified options if they had much-preferred alternatives even for the same pay. Although I have shown that compulsory service is partly equivalent to a ceiling on the earnings of young people, would politicians or anyone else who advocate compulsory service call explicitly for such a ceiling? I very much doubt it!

09/16/2007

There is tremendous speculation about how much, if at all, the Fed will reduce the federal funds rate at its meeting next week on Sept. 18th. This is the interest rate that banks use to lend their reserves held with the Fed to other banks. This rate in turn affects the interest rates banks charge borrowers, and ultimately that affects other interest rates in the economy. The Fed changes the federal funds interest rate through open market operations that involves buying or selling bonds. Some investors are looking for a full ¬Ω point reduction from a federal funds rate of 5 1/4 per cent to 4 3/4 per cent, while others expect a reduction of only ¬º of one per cent. If the Fed took no action, there would be many disappointed investors, and probably a large sell off in worldwide stock markets.
The uncertainty among investors about what the Fed (and other central banks) will do, and the expectations that form around this uncertainty, have created an environment where central banks almost have to take some actions to avoid major negative reactions in financial markets. Instead of central banks determining expectations in financial and other markets, expectations are now determining central bank policies. As decision time approaches, the Fed comes under enormous political pressure to take the actions expected by influential investors and businesses. Although political and other forces help determine what the Fed will do, there is still great uncertainty over the precise actions it takes, as with the current speculations over the magnitude of the change next week in the federal funds rate. This political process surely is not what was intended when "independent" central banks were created.
To regain control over expectations and its own policies, the Fed should establish a rule easily calculated from publicly available information about how the federal funds rate is determined. With such a rule, investors and businesses would be able to forecast perfectly what the Fed will do next week because market participants would know all the information that determine the Fed's behavior. There could be no disappointments, and all market adjustments to any changes in the federal funds rate would be fully and continually incorporated in asset prices and other market measures before, not after, the Fed makes its decisions. Then Fed policies would be determining expectations about interest rates and other variables rather than the other way around.
To show how rules would work, suppose the rule was to target the inflation rate at 2 per cent per year. If say the actual inflation rate were 3 per cent over a several month period prior to a Fed meeting, the Fed would "lean against the wind", and raise the federal funds rate from its long run level by a specified amount known in advance to investors. This would counteract the higher than desired inflation rate. Conversely, if the actual inflation rate had been 1 per cent, the Fed would lower this interest rate by a specified amount that would be known by market participants. This action would help strengthen an economy that was weaker than the Fed desired. Investors would know what the Fed would do weeks and even months before the Fed did it, and they would adjust their behavior more smoothly to their accurate expectations about central bank behavior.
The same considerations would apply to more complicated "Taylor rules" that relate actions by the Fed not only to deviations of actual inflation rates from a targeted rate, but also to deviations of actual GDP growth from a potential growth rate. Since information could be made available to the public about how the Fed would use trends in labor force growth, investments, and productivity to calculate potential GDP growth, the Fed's responses implied by such a rule would also be known in advance. In this way, investors and other market participants could anchor their expectations to what the Fed will actually do in different macroeconomic situations.
According to a recent unpublished paper by John Taylor of Stanford University, the Fed would have raised the federal funds rate between 2002 and 2006 by considerably more than it did had such a Taylor rule been followed. By doing that, the Fed's actions would have prevented some of the mortgage and other lending at very low interest rates that took place during the past few years. Taylor's analysis suggests that following such a rule would have reduced, and perhaps even largely eliminated, the excesses in the housing boom since 2003.
Although the Fed is the most influential central bank, similar advantages of rules over discretion in setting interest rates apply to the European, British, Chinese, Japanese, Indian, and other major central banks. The less important central banks already have little discretion over their interest rates since global forces outside their control basically determine these. Of course, in the global economy what any major central bank does, especially what the Fed does, greatly affects the choices available to other central banks.
The use of rules rather than discretion to guide interest rate policy would shield central banks from domestic political pressures, and would anchor market expectations in accurate knowledge about what central banks will do in various local and global economic circumstances. These types of advantages of rules over discretion apply not only to central bank behavior, but also to policies by other government agencies. For example, should anti-trust authorities treat each merger, buyout, or meeting among competitors as unique events that require separate analysis to determine if they are anti-competitive, or should these regulators have clear and easily understand rules about what determines anti-trust violations? Clear rules are preferable here too since that would enable companies to predict the responses by anti-trust regulators when considering mergers and other actions. It would also help insulate these regulators from political pressures. In particular, the American and European attacks on Microsoft, and the European opposition to the merger of GE and Honeywell, probably would not have happened if competitive policies were guided by clear and sensible rules about what constitutes anti-competitive actions rather than by complaints of and pressures from politicians and from competitors to Microsoft and GE.

I am not competent to offer an opinion on macroeconomic policy. But I can, with some confidence, say this about Becker's proposal that the Federal Reserve Board adopt a rule approach to adjusting the money supply to limit inflations and recessions: there is no way in the existing legal regime to make such a rule enforceable. The Board is a creature of Congress. If it resists strong political pressures, Congress can retaliate. Unlike the Supreme Court, the Board has no constitutional standing. And even the Supreme Court, which Congress could not abolish without a constitutional amendment, is not immune from political pressures, because Congress can limit the Court's jurisdiction and controls the Court's budget. Moreover, political pressures influence who is appointed to the Court--and to the Fed as well. And Congress can pass laws that would impede or even nullify Fed policy, as by raising or lowering taxes or running deficits or surpluses in the federal budget.
Therefore, it might well be a mistake for the Fed to surrender discretion in favor of a rule approach. Discretion enables the Fed to bend in the face of political pressure; rigid adherence to rules might cause the Fed to break in the face of particularly intense such pressure. I understand that some central banks do follow a rule approach, but they may operate in a political context different from ours--I do not know.
The larger question is whether any public official can be totally nonpolitical in a democratic (perhaps in any) system. I suspect not.
On the broader issue of rules versus discretion, I doubt that generalization is possible. Rules have great virtues, but they are limited because they are necessarily based on information possessed by the rulemaker when the rule was made. No rulemaker is omniscient. After the rule is promulgated, unforeseen circumstances are likely to arise to which the rule will be maladapted. The inflexibility of rules has to be traded off against the benefits in simplicity, clarity, and ease of compliance and application that rules confer. The tradeoff will not always favor rules.
There are three alternatives to rules. One is standards. A fixed speed limit is a rule; negligence is a standard. A standard is less definite than a rule, which is a minus, but it is more flexible, which is a plus. It would be impossible to anticipate every possible cause of an accident (driving above 60 m.p.h. at night, in snow, in heavy traffic, on a divided highway, or in an SUV, etc.) and make a rule that would declare each cause to be either culpable or excusable. The negligence standard enables a court to determine liability as cases arise, on the basis of a weighing of the costs and benefits of measures that would have avoided the particular accident.
One way to state the difference between rules and standards is that standards enable information obtained after promulgation to be incorporated into the law without need for formal rulemaking. When for example Congress passes a vague statute, thus leaving it to the judges enforcing the statute to fill in the details, in effect the judges are enlisted in the legislative process. An example is the per se rules of antitrust laws, which are judge-made rules supplementing the general directives in the antitrust statutes.
Another alternative to rules is discretion, which differs from a standard in not being enforceable in court. For example, prosecutors in our system have discretion whether or not to prosecute a particular person for a particular crime. Unless a prosecutor bases an exercise of his discretion on an invidious ground, such as race or religion, a court will not review that exercise. Discretion in the criminal law is a way of introducing needed flexibility without creating loopholes through which criminals could escape the law. Criminal laws tend as a result to be overinclusive. People are constantly cutting corners of various sorts, often not realizing that by doing so they actually are violating a criminal statute. Prosecutors are, quite wisely, not given sufficient resources to prosecute every crime, but instead are given discretion to allocate their limited resources as they see fit. They can overlook the minor crimes without worrying that the criminal law contains loopholes that may enable a major criminal to elude justice.
Similarly, no driver actually obeys all the driving laws, but police rarely bother to ticket anyone who exceeds the posted speed limit by less than 5 or 10 m.p.h. Suppose the posted speed limit is 60 m.p.h., but the de facto speed limit is 70. If the posted speed limit were raised to the "realistic" speed limit of 70, many drivers would drive faster because the police would not have enough resources to catch all the speeders, so the realistic speed limit would rise. Moreover, police would lack flexibility to ticket the occasional driver who was driving above the posted but below the de facto speed limit but who the police believed should be ticketed anyway because he was driving erratically--weaving, tailgating, etc. Of course they could ticket him for these activities, but it would be harder to determine and prove them, compared to detecting speed with a radar gun.
The third alternative is presumptions or guidelines, which have the structure of rules--that is, are simple and definite--but which allow discretion in enforcement. An example is the federal sentencing guidelines, which enable a defendant, a judge, and probation officers to determine a definite range for a sentence for a particular crime committed by a person having particular characteristics (such as criminal history), but allow the judge to sentence outside the range if he can give a good reason for doing so based on sentencing factors set forth by Congress. This approach makes sense when there is a need for guidance but strict rules would be too inflexible.
The merger guidelines used by the Justice Department and the Federal Trade Commission are a further illustration of the presumption/guideline approach. They enable firms contemplating mergers to have a pretty good idea in advance of whether the merger will provoke a challenge from one of the enforcement agencies. The firms can go to the agency assigned to their proposed merger before the merger is consummated and get a definitive determination of whether it will be challenged. This procedure enables the lawyers and economists at the agency to decide whether the proposal is consistent with the spirit as well as the letter of the guideline.

09/09/2007

Two weeks ago the New York Times published an article on pollution in China: "As China Roars, Pollution Reaches Deadly Extremes," Aug. 26, 2007, section 1, page 1. The point of interest is this: "Sulfur dioxide and nitrogen oxides spewed by China's coal-fired power plants fall as acid rain on Seoul, South Korea, and Tokyo. Much of the particulate pollution over Los Angeles originates in China" (p. 6). These effects are separate from China's growing contribution to global warming: it is possible that by the end of this year China will surpass the United States as the leading emitter of carbon dioxide into the atmosphere. Although China is making some efforts to curb pollution, its efforts are more likely to reduce the rate of growth of pollution than to reduce it from its current level, because of the continued rapid expansion of the Chinese economy, which includes a rapid growth in the number of vehicles using China's roads.
Global warming affects the entire earth, though unequally, but Chinese air pollution is "exported" mainly to a few nations, mainly Korea, Japan, and the western United States. Other differences between the carbon-emission and conventional air-pollution phenomena are that there is far more uncertainty about the magnitude of the threat posed by global warming, and far greater costs to arresting global warming, than in the case of China's external air pollution, and this enables one to see the problem of international control of air pollution in rather clearer terms than that of controlling carbon emissions.
It is a problem of externalities. The costs of Chinese air pollution to Koreans, Japanese, and Americans are not costs to China, and the benefits of abating this external pollution would not be benefits to China. But this description of the problem ignores the Coase theorem, one version of which is that if transaction costs are low, the market itself will internalize externalities and thus solve the externalities problem. We might think of the present legal regime as one in which China has a property right in the activities that give rise to pollution, or stated more precisely that its ownership of coal-fired power plants, gasoline-powered vehicles, and so forth carries with it a right to pollute. If so, then Korea, Japan, and the United States (assuming they are the only countries seriously affected by Chinese pollution) could persuade China to reduce its pollution by paying China an amount of money just slightly above what it would cost China to reduce its pollution "exports" to these countries to the level desired by the "victim" nations. This assumes that the cost of the negotiations, both among the victim nations and with China, would not be so great as to prevent a deal that made all the parties involved better off; but it is not clear why those costs should be particularly high. Nor is there a serious danger that China would increase its polluting activities in order to extort more money from the other nations, since pollution hurts the people of China far more than it hurts any other population (the pollution described in the Times article is grotesque in its magnitude and lethality).
The transaction would be efficient, but it would also bring about a transfer of wealth from what I am calling the victim nations to China. But this is a common kind of market event. A real estate developer who wanted to create a residential community on land adjacent to a funeral home, and feared that the funeral home's presence would depress house values by giving the occupants of the houses an unwelcome reminder of their mortality, could pay the funeral home to relocate.
And if buying off a polluter seems crass--"Greens" would denounce it for conveying the message that pollution is a legitimate byproduct of economic activity (a "commodity" for the victims of air pollution to buy from the polluter)--there are other means of inducing China to reduce air pollution. There are things that China wants from Korea, Japan, and the United States, and these countries can give China some of those things in barter for China's strengthening its enforcement of its existing pollution controls or adopting and enforcing newer, more stringent ones.
An alternative would be to negotiate an international agreement by which China and all other nations surrendered control over their pollution to an international environmental protection agency. But the transaction costs would be prohibitive, in part because of extreme uncertainty about the policies that the agency would adopt. Nations do not surrender their sovereignty lightly.

It is more or less inevitable that China's economy will spew out a lot of pollution, given its extraordinary rate of growth for over 20 years, and the abundant supplies of coal that fuel its power generation. The important question raised by Posner is what, if anything, will induce China to cut its pollution, including the pollution that spreads internationally to its eastward Asian neighbors and countries in the western hemisphere, especially Canada and the United States.
Posner emphasizes the potential for international collaboration because the harm to these affected countries will tend to exceed the cost to China from cutting its pollution. China is imposing a burden on these other nations that it does not fully incorporate into its decisions about which fuels to use, how to invest in scrubbing and sequestering technologies and equipment that reduce the amount of pollutants that its plants use, its taxation of gasoline that discourage driving and more efficient cars, and the many other ways to reduce pollution. Since greater pollution-reduction efforts would lower the growth rate of its output, the harm to other nations would not enter into its policy calculations unless forced to by threats of economic retaliation, or induced to do so by various forms of intercountry compensation and cooperation.
The New York Times article referred to by Posner indicates that opposition to pollution is also growing rapidly in China itself for reasons that have little to do with protests of other countries. When countries start developing rapidly, their first concern is greater resources for consumption and investment, for they do not believe they can afford to take extensive measures to control air pollution if that slows down their growth out of poverty. As they get richer, however, concerns about the level and growth of various types of pollutants get magnified. As economies continue to develop, their citizens exert greater pressure on governments to improve air and water quality. Governments generally respond by regulating and taxing more extensively the omission of pollutants.
The result typically is that air, water, and other kinds of pollution at first rise sharply with economic development, and then fall about equally sharply as development proceeds still further. This inverted U-shaped relation between a country's level of pollution and its level of GDP per capita is called the "Environmental Kuznets Curve" after the Nobel prize-winning economist, Simon Kuznets. He had established such an inverted U-shaped relation between income inequality within a country and its level of per capita GDP, and researchers discovered about 20 years ago that the same type of inverted U relation holds for environmental damage, such as particulates in the air. In fact, the two Kuznets relations are not independent since one way to reduce inequality in measures of full income that include environmental damage is to reduce the degree of pollution.
Prior to the discovery of this U-shaped environmental relation, the general opinion was that environments were inevitably damaged more as industrialization increased and economies developed. That is still a common view among those unfamiliar with the evidence. To be sure, the full evidence indicates that no single relation between environmental effects and economic development fits all pollutants in all countries. For example, theory predicts that domestic opposition would make governments more responsive to local pollutants of air and water, and less responsive to global pollution, such as emission of greenhouse gases. In fact, the U-shaped relation does seem to hold better for local pollutants.
These Kuznets-type relations are beginning to take hold in China, as judged from the growing complaints about various types of pollution, and discussions by scientists and government officials about steps to take to respond positively to these complaints. This reaction to internal complaints may not be sufficient to satisfy its neighbors in Asia and in the Western hemisphere since as I mentioned, different types of pollution operate within and between countries. Moreover, China's richer neighbors would be more sensitive to pollution than the poorer Chinese are. However, as China continues to develop, the complaints due to "internal" externalities will begin to interact more with the complaints due to the "external" externalities imposed on other countries. The combination of internal and external complaints should push China even faster along reductions in environmental damage than has been typical in the past when countries responded mainly only to internal complaints about pollution levels.

There have always been communes, such as the Israeli kibbutzim, but they have usually failed, mainly because of free-rider problems. If wages are uniform, shirkers flourish; also, incentives to undergo training that would increase the value of one's output are blunted. Thus we read in the New York Times article of August 27 mentioned by Becker that "Mr. Varol was born on a kibbutz in the far north, but he left at 18. He is at peace in his new home, but bitter about the past. 'My parents worked all their lives, carrying at least 10 parasites on their backs,' he said. 'If they'd worked that hard in the city for as many years, I'd have had quite an inheritance coming to me by now.'"Yet, curiously, Varol's "new home" is one of the 30 percent of Israel's 250 or so kibbutzim that, accordingly to the Times article, remain genuine communes--that is, with collective ownership and equal wages, though the collective raising of children has probably been abandoned. (Curiously, Varol's kibbutz--Ein Ha-Shofet--was named in honor of Justice Brandeis, shofet being the Hebrew word for judge.) In trying to weaken the bond between parents and children, the founders of the kibbutz movement, echoing Plato, who in his sketch of an ideal communist state in the Republic had advocated the communal rearing of children, were acknowledging that parents' instinctual desire to advance their children was inconsistent with communal equality.
The kibbutz movement is almost a century old, and it is more remarkable that 30 percent of the kibbutzim are still communist than that 70 percent are not, although the Times article does not indicate the percentage of the total kibbutz population that lives in those "classic" communist kibbutzim or how complete their commitment to the kibbutz ideal actually is. An even more durable example of voluntary collectivist living that comes to mind is found in the Catholic monasteries and convents--and notice that it is too is founded on a realization that family ties are inimical to communal ordering. A kind of private quasi-collectivism persists in poor, disordered, or anarchic societies in which tribes and clans exercise functions that governments perform in wealthy societies.
The kibbutzim were founded as collective farms in a pre-mechanized agricultural economy. Because they were small, because the skill and effort of each of the members of a kibbutz could be readily observed and evaluated, because (really the same point) there was little specialization, because the danger posed by the surrounding Arab population created a strong sense of mutual dependence among kibbutz members, because many immigrants to what is now Israel did not have good employment options, and because of the mysterious Jewish enthusiasm for communist and socialist movements, free-rider problems could be contained, and so the "classic" kibbutzim, unlike most voluntary communes, and without the religious backing of Catholic monasticism, flourished for generations. Even so, kibbutzniks were never more than 7 percent of the Jewish population of Palestine. As the extraordinarily favorable conditions for voluntary collectivism waned, it was inevitable that the classic kibbutz system would fade.
The kibbutz in its original collectivist form gives us a glimpse of pre-political human society. In a society in which there is no effective central government, as was essentially the situation of the Jewish community in Palestine until Israel gained statehood in 1948 (and even afterwards, in frontier regions exposed to Arab terrorism), smaller groups will form for self-defense and the provision of other public goods, such as social insurance. Collective ownership and wage equality are ways of protecting each member of the collective from economic and other vicissitudes; "from each according to his ability, to each according to his needs"--the communist slogan actualized in the classic kibbutz--is then a method of social insurance. The difference between the uniform wage that every worker receives and the below-average value of a particular worker's output because of age, infirmity, wounds, or sheer inability is in effect a transfer, in the nature of insurance proceeds, from the other workers. But it is less efficient than the forms of private and social insurance that arise when there is a government that can enforce property rights and thus enable industries such as the insurance industry to function, and that can provide social insurance out of tax revenues.
Probably, then, human beings have both collectivism and individualism in the genes, enabling us to adapt both to environments in which collectivism is welfare-promoting and environments in which individualism is welfare-promoting.

There were a number of good comments. I respond to a few here. One pointed out that the interstate highway system was largely built in the 1950s and 1960s, rather than continuously. As a result, it presents a "bloc obsolescence" problem necessitating heavy expenditures on maintenance and rebuilding--costs exacerbated by the unanticipated wear and tear resulting from the vast increase in usage of the system. This makes the problem of financing the necessary expenditures an urgent one.
Another comment points out perceptively that imposing tolls on users of the interstate highways could create a negative externality by deflecting users to non-toll roads, thus increasing congestion and wear and tear on those roads. That is an argument for tolling all roads--to which two objections are raised in comments. One is that tolls will be prohibitive on roads that are lightly traveled, assuming that their light traffic doesn't reduce maintenance costs to trivial levels (as it would not). What is true is that tolls will be kept down in order to avoid deflecting users of these roads to more congested roads, adding to the congestion on them. The second objection is that it is infeasible to impose tolls on busy commuter roads such as the Minneapolis bridge that collapsed, because it would slow down traffic too much. But this is a short-term objection. Technology is rapidly coming on line, and at rapidly falling cost, to enable tolls to be charged (and varied with time of day to minimize congestion) without need for toll booths, but instead through a system of sensors in the pavement and cameras overhead.